TOKYO ENERGY & SYSTEMS INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥34.28B
• Operating Income: ¥1.18B
• Net Income: ¥630M
• EPS: ¥44.69

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Tokyo Energy & Systems (Tokyo Enesis, 19450) delivered solid FY2026 Q2 (1H) results with clear operating leverage. Revenue rose 12.3% YoY to ¥34.283bn, while operating income grew 46.3% YoY to ¥1.18bn, lifting the operating margin to approximately 3.4%. Ordinary income reached ¥1.391bn, indicating positive non-operating contributions on top of improved core execution. Net income surged 136.3% YoY to ¥1.489bn, outpacing the growth in ordinary profit and suggesting the presence of extraordinary gains and/or favorable non-operating items under JGAAP. The company’s interest burden remains light, with interest expense of ¥94m and an interest coverage ratio of 12.6x, providing cushion against higher rates or temporary project disruptions. Balance sheet strength is a notable positive: total assets are ¥102.686bn, total liabilities ¥39.654bn, and total equity ¥70.272bn, implying an equity ratio around 68.5% despite the reported “0.0%” (unreported). Liquidity is robust, with current assets of ¥58.018bn against current liabilities of ¥28.347bn, yielding a current ratio of 204.7% and substantial working capital of ¥29.671bn. DuPont metrics indicate a mid-single-digit net margin (4.34%), moderate asset turnover (0.334x), and low leverage (1.46x), delivering an ROE of 2.12% for the period; sustaining margin improvement and turnover will be key to lifting ROE closer to sector norms. The YoY profit delta vis-à-vis revenue suggests mix and execution improvements, likely supported by better pricing or lower project costs. Given the project-based nature of the business, 1H margins can be volatile; still, the step-up in operating income versus sales points to positive operating leverage. Cash flow disclosure is not available in this XBRL set (zeros indicate unreported), limiting direct assessment of operating cash conversion and free cash flow. Dividend data show DPS and payout as zero (unreported/undetermined), so distribution policy signals cannot be inferred from this release alone. Overall, the company combines improving profitability trends with a conservative capital structure, offering resilience into 2H execution and bid/order cycles. Key watchpoints are order intake, backlog quality, project margin realization, and the composition of non-operating/extraordinary items that boosted bottom line. Data gaps (gross profit, CF statements, per-share book value) constrain deeper KPI triangulation, so subsequent filings and the full-year report will be important to validate sustainability.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 4.34% × asset turnover 0.334 × financial leverage 1.46 → ROE 2.12%. The margin uplift versus revenue growth indicates improved operating efficiency and/or project mix. Operating margin is approximately 3.4% (¥1.18bn / ¥34.283bn), expanding strongly YoY given operating income rose 46.3% on 12.3% higher revenue. Ordinary income at ¥1.391bn exceeds operating income by ¥211m, evidencing positive non-operating contributions (e.g., financial income, equity method gains, or other non-operating income). Net income outpaced ordinary income, implying extraordinary factors under JGAAP supported the bottom line; this boosts reported ROE but may not be recurring. Interest expense is modest at ¥94m, and 12.6x coverage corroborates manageable financial costs. Margin quality: absent gross profit disclosure, we infer margin gains came from project execution and cost control; monitoring cost-to-complete estimates and variation orders is crucial for persistence. Operating leverage: operating income growth (46.3%) significantly exceeded sales growth (12.3%), indicating favorable fixed-cost absorption and scale benefits; however, project timing can reverse this in weaker quarters. Efficiency: asset turnover at 0.334x (1H snapshot) is typical for engineering/services with sizable working capital; improving turnover would be a key ROE lever alongside maintaining margins.

Growth Assessment

Revenue growth of 12.3% YoY to ¥34.283bn suggests stable demand in core electrical/plant engineering markets. The stronger expansion in operating and net income indicates higher-quality growth than top-line alone, likely due to better pricing, favorable project mix, or reduced execution losses. Ordinary income exceeding operating income points to ancillary income streams supporting growth; sustainability depends on the repeatability of such items. Net income +136.3% YoY likely reflects non-recurring or lumpy items; we treat this as partly non-structural until validated by full-year trends. With a strong balance sheet, the company is positioned to pursue selective growth opportunities without stressing leverage. Outlook hinges on order intake, backlog conversion, and utility/infrastructure capex cycles; the 1H performance implies a supportive backdrop, but project phasing could moderate 2H growth. Absent order/backlog disclosure here, we assume mid-single-digit to low double-digit revenue growth is plausible if current run-rate persists, with profits sensitive to margin discipline. Execution risk remains central; cost inflation and subcontractor availability can swing margins in later phases of projects.

Financial Health

Liquidity is strong: current assets ¥58.018bn vs current liabilities ¥28.347bn yield a current ratio of 204.7% and working capital of ¥29.671bn. Quick ratio equals current ratio (inventories undisclosed), implying ample liquid assets reported in current assets. Solvency: inferred equity ratio is approximately 68.5% (¥70.272bn/¥102.686bn), despite the unreported figure shown as 0.0%. Total liabilities to equity is ~0.56x, consistent with the provided debt-to-equity ratio, suggesting conservative leverage. Interest burden is light with ¥94m interest expense and 12.6x coverage, offering buffer against rate hikes. While the balance sheet line items do not sum perfectly by the limited disclosure, the directionality indicates a solid capital structure with room for investment or temporary working capital swings.

Cash Flow Quality

Cash flow statements (OCF, investing CF, financing CF, and cash & equivalents) are unreported in this dataset, preventing direct analysis of cash conversion, capex, or free cash flow. Earnings quality must therefore be inferred from the P&L and balance sheet. The significant rise in operating income versus sales suggests healthy underlying operations, but without OCF we cannot confirm conversion. Project-based businesses often experience intra-year working capital volatility (receivables and unbilled revenue vs. advances), so 2H OCF could differ materially from 1H profit. Depreciation is unreported; EBITDA cannot be assessed, limiting non-cash earnings analysis. With strong working capital headroom (¥29.671bn), short-term liquidity appears adequate to absorb timing swings, but we cannot compute FCF coverage of dividends or growth capex.

Dividend Sustainability

Dividend per share and payout ratio are shown as zero due to non-disclosure; policy and distributions cannot be inferred from this dataset. Capacity-wise, 1H net income of ¥1.489bn and low leverage imply flexibility to fund dividends if the company so chooses. However, absent OCF and capex data, we cannot assess free cash flow coverage. Historically for engineering firms, dividend decisions consider full-year profit realization and cash generation due to project timing; thus, 2H results and year-end cash flows will be determinative. Until full-year disclosures, we treat dividend sustainability as indeterminate but potentially supported by the strong balance sheet.

Risk Assessment

Business Risks:

• Project execution risk leading to cost overruns or margin erosion in later phases
• Order intake and backlog timing risk affecting revenue visibility and utilization
• Input cost inflation and subcontractor availability impacting cost-to-complete
• Customer concentration in utilities/energy infrastructure cycles
• Regulatory and safety compliance requirements in power and industrial sites
• Competitive bidding pressure on new projects affecting pricing power

Financial Risks:

• Working capital volatility from receivables/unbilled balances and advance payments
• Potential non-recurring items influencing bottom line and masking run-rate earnings
• Interest rate increases, albeit mitigated by low leverage and strong coverage
• FX exposure on imported equipment or any overseas projects (if applicable)

Key Concerns:

• Sustainability of net income strength given signs of extraordinary/non-operating contributions
• Lack of cash flow disclosure limits assessment of earnings quality and FCF
• Potential margin normalization in 2H as project mix shifts and cost inflation persists

Investment Implications

Key Takeaways:

• Healthy top-line growth (+12.3% YoY) with outsized operating income growth (+46.3% YoY) indicates operating leverage
• Net income up 136.3% YoY likely includes non-operating/extraordinary support under JGAAP
• Strong liquidity (current ratio ~205%) and low leverage (~0.56x liabilities/equity) provide resilience
• Interest coverage at 12.6x suggests limited financing risk
• ROE of 2.12% leaves room for improvement via sustained margins and better asset turnover
• Cash flow and gross profit data are unreported; verification of cash conversion is pending

Metrics to Watch:

• Order intake and backlog, including margin quality and project mix
• Operating margin trajectory and cost-to-complete revisions
• Operating cash flow and working capital movements in 2H
• Non-operating and extraordinary items within ordinary-to-net income bridge
• Capex requirements and any changes in depreciation once disclosed
• Equity ratio and net cash position when cash is disclosed

Relative Positioning: Within Japanese plant engineering and electrical construction peers, Tokyo Enesis exhibits stronger-than-average balance sheet conservatism and improving operating leverage in 1H, but with below-peer ROE and limited visibility on cash conversion pending fuller disclosures.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis